When Gov. Tim Pawlenty gives his State of the State address to the Legislature today, he is expected to offer up a fiscally Spartan vision that centers on major reductions in state spending and lower corporate tax rates to spur job growth, according to sources familiar with briefings Pawlenty has given.
Details won't emerge until Pawlenty releases his budget proposal later this month, but the spending cuts are expected to include massive reductions in health and human services, while preserving K-12 school funding.
As an additional spur to business growth, Pawlenty will propose a 100 percent up-front sales tax exemption for some business purchases and other tax changes, sources said.
But the centerpiece will be a significantly shrunken state government, already hobbled by a nearly $5 billion deficit that is expected to climb in coming months.
"He'll jolt us into reality," said House Minority Leader Marty Seifert, R-Marshall. Seifert said that while he did not know definitively what Pawlenty would propose, "I've met three times with him in the last week and I know he wants his message to be about spending cuts and growing jobs."
What is not in the mix, apparently, is any kind of tax revenue increase. That will set Pawlenty in direct conflict with a DFL-controlled Legislature.
House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, has said that while DFLers are aware of the need for spending cuts, the state's economic condition is too grave to rule out a combination of cuts and some tax increases. The demand on state services, from unemployment funds to health care, all typically rise as the economy worsens.
But Pawlenty has said that tax increases would cripple the state's ability to compete for what little business activity is out there, and that in addition to state government doing more with less, it would simply have to do less, despite the need.
Minnesota's not alone
Minnesota's fiscal position is not unique, and from Connecticut to California, Idaho to Iowa, governors have already delivered a bracing dose of reality to an anxious public.
Whether Red or Blue, the state of most states is slightly panicked, with pain on the horizon.
In Idaho, Republican Gov. Butch Otter dropped a bomb last week when he said the time had come for actual cuts to K-12 schools of more than 5 percent, and double that for colleges and universities.
In Colorado, Democratic Gov. Bill Ritter said in his State of the State address that he will cut wages for state employees. "The coming budget will be hard on public servants," Ritter said. "Employee compensation will be part of the solution."
Ritter, like Pawlenty and so many others, is trying hard to look for shafts of optimism in the gathering storm, particularly in the "green" economy. Ritter's twist? A call to require that all new home construction be "solar-ready."
Connecticut Gov. Jodi Rell, a Republican, pulled few punches in her address, declaring that greater need notwithstanding, "government must shrink," and that "the cuts that must be made will be deep and they will affect every agency, every program and every service provided by state government."
An odd stew of cuts, hikes
Driven by deficits not seen in modern times, a number of governors from both major parties are offering an often odd mix of spending cuts, tax increases and sometimes tax cuts, hoping for that magic elixir that will stir a moribund economy to life.
In New York, Democratic Gov. David Patterson is pitching a "fat tax" that would be levied on sugary sodas along with a call to eliminate some burdensome state mandates, cuts to local government and a dramatic lowering of the cost of doing business in New York.
In Idaho, Otter's odd brew has already met with criticism, for coupling a cut to schools with an increase in the state's gasoline tax to boost road construction.
In Nevada, Republican Gov. Jim Gibbons is proposing a 6 percent salary cut to state employees that extends to the state's teachers, university professors and support employees.
Sources close to Pawlenty's discussions say the administration may consider a wage freeze that could extend to all employees who receive state funds, but that no final decisions had been made.
Pawlenty will release his budget on Jan. 27.
Patricia Lopez • 651-222-1288
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